REFILE-UPDATE 2-British toy maker Hornby H1 profit halves

(Adds dropped word "bus" in third paragraph)

* Cuts interim dividend

* Underlying pretax profit 1 mln stg vs 2 mln

* Turnover up 5 pct to 25.5 mln stg

(Recasts, adds more detail, interview with chief exec, shares)

By Sharon Lindores

LONDON, Nov 13 (Reuters) - Pretax profit at Hornby (HRN.L) halved in the first six months, mainly due to foreign exchange losses, and the British toy maker said it was on target for a 20-percent fall in annual earnings to 5 million pounds.

Chief Executive Frank Martin said he expected a better second half in line with forecasts and a stronger Christmas than last year, with full-year revenue up about 10 percent.

Sales of the Scalextric Brawn Formula One team of new world champion Jenson Button should do well and a Corgi model of a red London bus used in the handover from China to Britain for the 2012 Olympic Games would be a hit, he said.

Martin said sales were robust for items priced under 50 pounds and over 250 pounds.

Hornby - famous for toy trains, Airfix models and Corgi toy cars - made an underlying pretax profit of 1 million pounds ($1.66 million) in the six months to Sept. 30, down from 2 million in the same period last year.

Turnover for the first half was up 5 percent at 25.5 million pounds and net debt fell to 14.7 million pounds from 17.1 million a year ago.

Martin said that margins should improve in the spring due to forward currency purchases but the company said it would not pay an interim dividend, which was 2.7 pence a year before.

Underlying pretax profit last year was 6.3 million pounds.

The results were disappointing, said Altium Securities analyst David O'Brien.

"The problems are currency related and also sluggish demand in a number of markets, not least the U.S. and the UK," O'Brien said. "But on balance, what we do have is Airfix, Corgi and Hornby Italia actually showing good growth.

Altium has a "Sell" recommendation and a target price of 120 pence, but O'Brien said he is looking to revise his estimates downwards.

Shares in Hornby were up 0.7 percent at 145.9 pence at 1106 GMT, valuing the business at about 55 million pounds. (Editing by David Cowell) ($1=.6017 Pound)